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CIRCULAR No. 84/1997/TT-BTC OF NOVEMBER 13, 1997 GUIDING THE AMENDMENT AND SUPPLEMENT TO SOME POINTS IN CIRCULAR No. 72A-TC/TCT OF AUGUST 30, 1993, CIRCULAR No. 107-TC/TCT OF DECEMBER 30, 1993 AND CIRCULAR No. 53-TC/TCT OF JULY 13, 1995 OF THE MINISTRY OF FINANCE ON IMPORT AND EXPORT DUTIES

Pursuant to Decree No. 54-CP of August 28, 1993 of the Government detailing the implementation of the Law on Import and Export Duties and the Law on Amendments and Supplements to a Number of Articles of the Law on Import and Export Duties;

Pursuant to Circular No. 72A-TC/TCT of August 30, 1993, Circular No. 107-TC/TCT of December 30, 1993 and Circular No. 53-TC/TCT of July 13, 1995 of the Ministry of Finance;

Over the past few years Vietnam's import and export activities as well as regional and international trading situation has witnessed many changes, the trading forms have been expanded and especially the trend of international economic and trading integration amongst the different regions in the world has influenced our socio-economic development. These changes have affected our policies on trade and import and export duties, thus demanding a suitable tax system to ensure the production and business activities of enterprises as well as to bring into play the tax instrument as a lever for economic development, ensure sufficient revenues for the State budget. It is therefore necessary to issue a document guiding the amendment and supplement to the import and export duty policy in order to overcome problems and repeal regulations unsuitable to the reality for uniform implementation which has not yet been specified in any guiding documents.

After consulting the Ministry of Trade, the Ministry of Planning and Investment and the General Department of Customs, the Ministry of Finance hereby provides the following guidance on the amendment and supplement to a number of matters related to import and export duties:

1. Cases eligible for consideration of duty refunding

To supplement some points stipulated in Section VII, Circular 72A-TC/TCT of August 30, 1993 and Circular 53-TC/TCT of July 13, 1995 of the Ministry of Finance as follows:

1.1. To supplement some points of Circular No. 53-TC/TCT above: For goods which are materials and supplies imported for the production of goods for export:

The quotas of materials and supplies consumed in the production of goods for export shall be formulated by each enterprise and its director shall be accountable for the legal basis and preciseness of such quotas and register them with the tax agency (of the locality where the enterprise organizes the production of such goods) and the customs agency (where the enterprise fills the procedures for the import of materials and supplies and the export of products). The quota registration with the tax agency and the customs agency shall be done before filling the import procedures. On the basis of the registered raw materials and material quotas, the customs agency shall consider the refunding of the paid import duty (or the duty exemption) on the portion of materials and supplies already used during the production process corresponding to the quantity of exported products. If the registered consumption quota fails to accord the actual consumption, the enterprise shall have to immediately report it to the tax agency and the customs agency where such quota is registered, which shall serve as the basis for duty refunding upon the export of products. In cases where the enterprise fails to report such matter and if fraud is detected through inspection in the formulation of quotas, this shall be considered a fraudulence to evade tax and the enterprise shall have to pay all import duty arrears (the difference) and be fined in accordance with the Law on Import and Export Duties currently in force.

If the customs agency has any doubt about the consumption quotas of materials and raw materials for production of goods for export, it may request an expertise by an agency specialized in the management of such goods item to serve as the basis for considering import tax refunding for the enterprise.

Annually, the customs agency shall assume the prime responsibility and coordinate with the local tax agency in organizing the inspection of the consumption quotas of materials and supplies for the production of export products related to the refunding of import duty.

The duty refunding shall be only applicable to enterprises importing (in the form of direct import, entrusted import or on-the-spot import) materials and supplies for production by themselves or for sub-contracted production and receiving back products for export (in the form of direct export, entrusted export or on-the-sport export). All cases of purchase and sale of local materials and supplies in any form for production of finished products for export shall not be eligible for consideration of import duty refunding.

1.2. To supplement Item e, Point 1, Section VII of Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance: For the imported goods which are inconsistent with the already signed commercial contract, or, for an objective reason, must be re-exported back to the foreign party:

1.2.1. If the goods still remain in the storehouse or yard at the border gate under the supervision and management of the customs agency and are now allowed to be re-exported, the import and export duties thereon shall not be paid; Or if the import duty has been paid, it shall be refunded according to Point 1a, Section VII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance.

1.2.2. If the goods are beyond the supervision and management of the customs agency, when they are re-exported, an amount of the paid import duty corresponding to the quantity of goods re-exported to the foreign party shall be refunded and the export duty shall not be paid provided that all the following conditions are met:

* The discovery of the inconsistency of the goods with the signed foreign trade contract or for an objective reason within 45 days from the date the enterprise receives goods from under the management of the customs agency at the border gate.

* The expertise result of the competent goods expertizing State agency (the third expertise) immediately upon the discovery of the goods' inconsistency.

The clear explanation for such inconsistency of the agencies (customs, Vinacontrol) which already expertized the imported goods.

The head of the unit shall have to report the matter to the local tax agency and the customs agency that processes the import procedures for the goods for supervision and management. Immediately after the goods expertizing agency finishes the re-expertise of the goods and discovers some inconsistencies, the customs agency shall have to seal up the goods until they are re-exported.

The dossier applying for import duty refunding and export duty exemption includes:

- A written request of the unit clearly stating the reason for re-exporting the goods back to the foreign seller (clearly certifying the inconsistency(ies) of the imported goods with the technical criteria, quality, quantity... defined in the already signed contract).

- The expertise documents of the goods expertising agencies in Vietnam upon the import of the goods and discovery of some inconsistencies with the contract.

- The certification and opinion of the customs agency that processes the import procedures for the goods and the local tax agency regarding the goods' inconsistencies with the contract.

- The foreign seller's written agreement to receive back the goods (or the foreign seller's notice of acceptance of the goods) clearly stating the reason for receiving back the goods.

- The customs declaration of import goods, having the customs agency's inspection and liquidation results therein.

- The customs declaration of export goods, having the customs agency's certification of the actual export of the goods therein clearly indicating the declaration form of the imported goods under which the goods are permitted to be re-exported.

- The receipt of the import duty payment issued by the customs agency.

- The goods import contract properly and legally signed with the foreign party

- The contract on the entrusted import or export if the goods are imported or exported in this way.

1.3. To supplement Item e, Point 1, Section VII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance: For machinery, equipment and tools imported by the establishments and contractors that win bids for projects in Vietnam in service of the construction and installation work during the construction time and for machinery, equipment and tools which are hired or borrowed from abroad by Vietnamese enterprises in service of their production activities, with the Ministry of Trade's permission for their import in the form of "temporarily imported goods for re-export", the import duty already paid thereon shall be refunded according to Item e, Point 1, Section VII, Circular No. 72A-TC/TCT above. An import duty shall be temporarily paid when such goods are imported and be refunded when they are re-exported out of the territory of Vietnam. The amount of to-be-refunded import duty shall be determined on the principle that the remaining use value of the machinery, equipment and tools at the time of re-export shall be calculated on the basis of the time they are used and left in Vietnam, more concretely as follows:

* For brand-new machinery, equipment and tools imported into the territory of Vietnam:

- If the time they are used and left in Vietnam is six months or less, the full amount of paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over six months to one year, 85% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over one year to two years, 70% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over two years to three years, 55% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over three years to four years, 40% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over four years to five years, 25% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is over five years, 15% of the paid import duty shall be refunded.

* For used machinery, equipment and tools allowed to be imported into the territory of Vietnam

- If the time they are used and left in Vietnam is six months or less, the full amount of paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over six months to one year, 80% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over one year to two years, 60% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is from over two years to three years, 45% of the paid import duty shall be refunded.

- If the time they are used and left in Vietnam is over three years 30% of the paid import duty shall be refunded.

If such goods are not re-exported, the importing enterprise shall have to pay fully the import duty arrears, be fined in accordance with the Law on Import and Export Duties and subject to an administrative sanction in the field of commerce.

The dossier applying for import duty refunding includes:

- A written request of the establishment for the refunding of the paid import duty or export duty (if any), clearly stating the reasons therefor.

- The competent level's document (or decision) on the bid winning (for contractors). The contract (or agreement) between the Vietnamese enterprise and foreign party on the hiring or borrowing of machinery and equipment in service of production.

- The Ministry of Trade's written permission for the import of equipment and tools, clearly indicating they are "temporarily imported for re-export".

- The customs declaration of import or export goods, having the customs agency's liquidation and certification therefor.

- The receipt of the duty import payment.

- The contract on the entrusted import or export (if the goods are imported or exported in this way).

In cases where contractors continue to win bids for construction or installation of other projects in Vietnam and they are permitted by the Ministry of Trade to use the above-mentioned machinery, equipment and tools in service of such projects and to fill the on-the-sport import or export procedures, they shall not have to pay import and export duties thereon (namely, they shall only pay the import duty when filling the procedures for importing for the first time the goods into the territory of Vietnam and be refunded such import duty when the goods are re-exported out of the territory of Vietnam).

1.4. To supplement Point e, Section VII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance: For machinery and equipment (excluding cars of all kinds) owned by Vietnamese establishments and enterprises, which are temporarily exported abroad for repair or overhaul or which are temporarily exported and re-imported after being repaired by the foreign seller during the warranty period as agreed upon in the already signed foreign trade contract on the sale and purchase of machinery and equipment and are permitted by the Ministry of Trade as being "temporarily exported before re-imported" upon their import, the import and/or export duty thereon shall not be paid. The customs agency shall process the import or export procedure and oversee the temporarily exported goods until they are re-imported according to current regulations and issue a decision not to collect duty in these cases.

The conditions required for these cases include:

- A written request of the establishment or enterprise, clearly explaining the reasons or causes of taking the machinery and equipment abroad for repair together with the commitment to re-import them. This request must be certified by the superior agency.

- The lawfully and properly established contract for the repair of machinery and equipment between the establishment and the foreign party, clearly describing the state of the machinery and equipment to be repaired (quantity, value, serial number and sign, year of manufacture...); the list, quantity and value of the components and parts to be repaired; the state of the machinery and equipment when re-imported (quantity, value...); repair costs;...

- The fixed asset card of the machinery and equipment certified by the local tax agency which manages the enterprise.

- The written notice of the expertise result by the import and export goods expertizing agency permitted by the State.

- The Ministry of Trade's document to permit the establishment to temporarily export the machinery and equipment abroad for repair before re-importing them.

- The customs declaration of export goods with the border gate customs agency's certification of the goods inspection and liquidation.

- The customs declaration of import goods, having the border gate customs agency's certification and liquidation, clearly indicating the customs declaration for export goods according to which the goods are re-imported.

- The contract on the entrusted import or export if the goods are imported and exported in this way.

* For the cases defined in Item (1) above, when re-exporting or re-importing goods, the export or import procedures must be filled at the customs agency of the place where the goods were first imported or exported. If any act of evading import or export duty is discovered, the violator shall have to pay, apart from all duty arrears, a fine in accordance of the Law on Import and Export Duties currently in force.

2. To amend and replace Item d, Point 1, Section VII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance as follows: For import goods with their quality, specifications and category inconsistent with the foreign trade contract signed with the foreign party due to the wrong delivery by the foreign party, accompanied with the competent State expertizing agency's expertise paper and the foreign party's confirmation, the Customs Department of the province or city directly under the Central Government shall base itself on the result of inspection of the actually imported goods to consider and permit the import of goods (if such goods are not in violation of the Ministry of Trade's and the General Department of Customs' regulations on import goods). At the same time, it shall recalculate the import duty to be paid so as to collect a duty amount according to the actually imported goods. If the establishment has paid an import duty in excess of the import duty amount recalculated according to the actually imported goods, it shall be refunded the excess amount.

In case the customs agency sees that the import goods may greatly affect the consumer's interests such as negatively affecting the living conditions and the environment, or the people's health, causing a poor quality of products..., it shall have to consult the Ministry of Trade which shall have to reply in writing to permit the import of such goods or compel the enterprise to re-export the goods back to the foreign seller.

3. To amend and replace Point 2, Section V, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance as follows:

For import and export goods of foreign-invested enterprises and parties to business cooperation contracts which should enjoy special investment incentives on the case-by-case basis, after having the written agreement from the Ministry of Finance, the Ministry of Planning and Investment may consider the exemption of import or export duty for each specific case in accordance with Article 63, Decree No. 12-CP of February 18, 1997 of the Government. The consideration of import duty exemption for each specific shipment of goods shall provisionally comply with the provisions in Circular No. 20-TC/TCT of March 16, 1995 of the Ministry of Finance.

4. To replace the group of words " the VINACONTROL agency" in Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance with the group of words "the import and export goods expertizing agencies permitted by the Vietnamese State" for dealing with import and export duties in accordance with Article 14, Decree No. 54-CP of August 28, 1993 of the Government detailing the implementation of the Law on Import and Export Duties and the Law on Amendments and Supplements to the Law on Import and Export Duties.

5. To supplement to the end of Section VII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance the following paragraph: For the cases eligible for consideration of import or export duty refunding by the Ministry of Finance (the State Budget Department), apart from compliance with the provisions of Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance, the following additional papers are required:

- A written request of the establishment to the Ministry of Finance (the State Budget Department) for refunding the amount of import or export duty to be refundable, clearly stating its account number at the bank where the transaction will be effected.

- The written document of the Customs Department of the province or city directly under the Central Government where the establishment fills the import or export procedures, requesting the Ministry of Finance to approve the refunding of the import or export duty to the establishment, clearly confirming the import or export duty amount already paid to the State Budget, the duty amount to be refunded...

- The voucher on the customs agency's payment of the import or export duty to the State budget (Account No. 741) certified by the State Treasury where the duty is paid. The State Treasury's certification must clearly indicate: The date of payment to the State budget, the amount paid to the State budget, the chapter, class, clause, item and category of the State budget classification and be affixed with the signature of the head of this State Treasury so that the Ministry of Finance can have the basis for checking and considering the refunding of the paid duty amount from the State Treasury to the payer.

- The dossier applying for duty refunding sent to the Ministry of Finance (the State Budget Department) must be the original or the copy certified by the State notary. For the documents which are not certified by the State notary, the requesting establishment must certify the copies by itself and be accountable for their legality and, at the same time, produce the original documents for the State Budget Department to compare them with the copies, then return the originals to the establishment.

6. To amend and supplement the fourth paragraph dash (-), Point 1, section VIII, Circular No. 72A-TC/TCT of August 30, 1993 of the Ministry of Finance regarding the procedure and competence to collect import and export duty arrears and impose fines on violations of the Law on Import and Export Duties for the cases where duty arrears are collected, as follows:

- For the cases where violations are discovered by the customs agency through inspection, such customs agency shall issue a decision to collect all duty arrears, impose fines and organize the fine collection according to current regulations.

- For the cases where the tax agency or the financial inspectorate inspects and discovers acts of evading import or export duty committed by enterprises, the director of the provincial/municipal Tax Department or the head of the financial inspectorate (of the provincial/municipal or higher level) shall have the power to issue a decision to collect all duty arrears and impose fines in accordance with the provisions of the Law on Import and Export Duties and the Law on Special Consumption Tax. the duty arrears and fines shall be collected as follows:

+ 100 (one hundred) per cent of the arrears of import and export duties or special consumption tax (if any) shall be paid to the central budget.

+ The fines and proceeds from the sale of confiscated goods (if any) shall be paid according to current regulations of the Ministry of Finance.

The amount of collected duty arrears and fines mentioned above shall be accounted into the revenue of the locality where duty arrears are collected, at the year-end, deductions for commendation shall be considered for any extra revenue in accordance with the provisions of the Law on the State Budget.

- For cases inspected and discovered by other agencies, such agencies shall make a dossier thereon and request the customs agency to issue a decision to collect duty arrears, impose fines and organize the collection of fines according to current regulations.

Establishments or individuals that have merits in discovering and collecting import and export duty arrears shall be entitled to rewards deducted therefrom according to Decree No. 22-CP of April 14, 1996 of the Government and Circular No. 45-TC/TCT of August 1, 1996 of the Ministry of Finance.

For cases where the tax agency or the financial inspectorate discovers and collects duty arrears, if, when calculating the import or export duty arrears to be collected, such agency faces any difficulty in determining the duty rate or price for tax calculation, it shall coordinate with the customs agency of the same level for settlement. In case the duty payer deliberately delays in paying the duty, the tax agency or the financial inspectorate may resort to, in coordination with the customs agency, the forcible measures prescribed in the Law on Import and Export Duties, in addition to the forcible measures specified in Circular No. 45-TC-TCT of August 1, 1996 of the Ministry of Finance.

7. Regarding the procedural dossier and competence to consider the exemption of import duty and special consumption tax (if any) on the import goods of enterprises and organizations which are permitted by the competent State agency to trade in duty-free goods for sale at duty-free shops to the following eligible customers:

- Departing passengers and passengers in transit (including handlers of the transport means and the crews thereof) at the international seaports, the international road and rail border gates in Vietnam.

- Passengers on board flights and flight crews.

- Departing passengers at down-town duty-free shops.

- Arriving passengers (including flight screws and stewards on board international flights) at several international airports. In this case Decree No. 17-CP of February 6, 1996 of the Government on the quotas of duty-free baggage for passengers of entry and exit ports shall apply.

- Diplomatic missions subject to Decree No. 73-CP of July 30, 1994 of the Government.

Specifically, the procedural dossier includes:

+ A written request for import duty exemption.

+ A permit issued by the competent State agency to allow the enterprise to trade in duty-free goods (one copy is required only when filling the import exemption procedure for the first time).

+ The import quota (or plan) allocated by the Ministry of Trade, clearly indicating the eligible customers of import duty-free goods.

+ The customs declaration for import goods with the customs office's certification of goods inspection and the calculated duty.

+ The duty notice of the customs office.

+ The foreign trade contract signed with the foreign party affixed with the registration stamp of the Import and Export Permits Granting Group, the Ministry of Trade.

+ The invoice, the packing list...

On the basis of the above-said dossier, within 7 (seven) days, the Ministry of Finance (the General Department of Taxation) shall issue a decision on the temporary exemption of import duty and special consumption tax (if any). The customs office that processes the import procedures for the importing unit shall base itself on such decision of the Ministry of Finance (the General Department of Taxation) to process the procedures and affix the stamp "Temporary duty-free goods" on the customs declaration. The supervision and management of import and export goods of duty-free shops shall comply with current regulations of the General Department of Customs.

The customs agency which directly manages duty-free shops shall have a book for supervision and inspection of duty-free shops in their sale. The General Department of Customs shall provide guidance on the supervision and inspection of the duty-free shops for uniform application throughout the country.

Quarterly (on the tenth day of the first month of the subsequent quarter), the units trading in duty-free goods shall have to report on the settlement of the sale of duty-free goods as well as the quantity of goods left in stock to the Ministry of Finance (the General Department of Taxation) and the General Department of Customs. The General Department of Customs shall have to direct the inspection and the final settlement of duty-free goods sale to the right objects under current regulations and the settlement of each batch of goods according to the customs declaration for import goods attached with the settlement report. If, thirty days after this deadline, the unit fails to send the settlement dossier, the provincial/municipal customs agency shall be entitled to cease processing the procedures for importing duty-free goods until the unit fully sends the settlement report.

After the customs agency has approved the settlement of the sale of duty-free goods, the unit shall have to send such settlement attached with a written request to the Ministry of Finance (the General Department of Taxation) for consideration and decision on the official exemption of import duty and special consumption tax (if any) for the batch of goods. Within 15 days from the date of receipt of the unit's full dossier applying for the official duty exemption and on the basis of the customs agency's settlement, the Ministry of Finance (the General Department of Taxation) shall have to issue a written decision on the official duty exemption. Upon receiving the decision on the official duty exemption, the provincial/municipal customs agency and the customs agency that directly manages the duty-free shops shall compare these documents and process the procedures for liquidating the import duty amount.

In case the unit has goods in stock and it is permitted by the Ministry of Trade to sell such goods on the Vietnamese market, within 2 (two) days after the reason for duty exemption is changed, the unit shall have to declare it to the customs office for calculating and collecting fully import duty and special consumption tax (if any) arrears according to current regulations.

For the goods imported for sale at duty-free shops, if they are sold to the people other than those eligible for duty exemption or sold on the Vietnamese market without the permission of the Ministry of Trade, all of these acts shall be considered tax evasion and all import duty and special consumption tax (if any) already exempted shall be paid together with a fine of two to five times the evaded duty amount.

8. The competence to deal with the above-mentioned cases shall comply with the provisions of Circular No. 72A-TC/TCT of August 30, 1993, Circular No. 53-TC/TCT of July 13, 1995, Official Dispatch No. 732-TC/TCT of April 1, 1994 of the Ministry of Finance as well as the competence concretely defined in this Circular.

9. Every quarter and every year, the General Department of Customs shall sum up and send to the Ministry of Finance the reports on the data and situation of exemption, reduction and refunding of import and export duties and special consumption tax (if any) on import goods that the customs agency has the competence to deal with.

10. Organization of implementation:

This Circular takes effect 15 days after the date of its signing. All earlier provisions which are contrary to the provisions of this Circular shall be annulled. The Ministry of Finance requests the General Department of Customs to direct and guide the managerial process so that the Customs Departments of the provinces and cities directly under the Central Government can implement it, exercise a tight management, combat frauds and losses of State budget revenues and avoid causing inconveniences to enterprises.

The above-said cases of duty refunding which arise prior to the effective date of this Circular shall be dealt with by the Ministry of Finance on the case-by-case basis.

For the financial settlement of import duty and special consumption tax on import goods for sale to the people eligible for duty exemption at duty-free shops from January 1994 until now in accordance with the provisions of Circular No. 107-TC/TCT of December 30, 1993 and Circular No. 98-TC/TCT of December 30, 1995 of the Ministry of Finance, the General Department of Customs is requested to direct the inspection and settlement of the sale of duty-free goods according to the prescribed regime and customers and, at the same time, to sum up and report to the Ministry of Finance the situation of the financial settlement of the sale of duty-free goods for units. The enterprises which are permitted to sell duty-free goods shall have to send to the Ministry of Finance (the General Department of Taxation) the dossier applying for the official duty exemption as prescribed in Point 7 of this Circular.

In the course of implementation, any arising problems should be summed up and fully reported to the Ministry of Finance for consideration, study and further guidance.

For the Minister of Finance

Vice Minister

VU MONG GIAO